DC Office Building Commands $531M

601 Massachusetts Ave. NW

Tokyo-based Mori Trust has acquired 601 Massachusetts Ave. NW in Washington, D.C., a Class A, 480,000-square-foot office building from Boston Properties Inc., in the city’s largest deal this year at $531 million.

The LEED Gold-certified, 11-story building was developed by BXP in 2015. It’s currently 98 percent leased to tenants including Arnold & Porter LLP, a law firm with a 20-year lease, and the Entertainment Software Association. BXP will continue to provide property management services to the new owner.

BXP structured the disposition as a 1031 exchange deal, acquiring Madison Centre,  a Class A, 37-story, LEED Platinum certified office building in Seattle in May for $730 million from a joint venture of Barings and Schnitzer West. At the time, it was the largest multi-tenant office sale in the U.S.

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Mori Trust’s acquisition of 601 Massachusetts Ave. NW is also a record-breaker. It’s the largest office transaction in the District of Columbia so far this year. The $531 million price tag, which works out to approximately $1,110 per rentable square foot, surpassed Nuveen Real Estate’s $375 million purchase of the Patrick Henry Building at 601 D St. NW from Tishman Speyer in March.

Owen Thomas, BXP chairman & CEO, said in a prepared statement the disposition demonstrates continued investor demand for premier, well-leased office properties. Located in the Mount Vernon Square neighborhood, 601 Massachusetts Ave. NW is within a quarter mile of a Metro station. It’s also within close proximity to the Capital One Arena and the city’s convention center. The building has approximately 18,000 square feet of street-level retail space, including an RPM Italian restaurant.

Thomas added the sale represents an important milestone in BXP’s current strategy of reallocating capital to the Seattle market.

BXP was represented in the transaction by Eastdil Secured and DLA Piper LLP (US).

Other deals

601 Massachusetts Ave. NW isn’t the only disposition BXP has made in the DC metro in recent months. In June, Boston Properties sold an 11-building portfolio totaling approximately 740,000 square feet of flex office, industrial and data center space in Springfield, Va., to Finmarc Management Inc. for $127.5 million. The mixed-use portfolio was located within the Virginia 95 Business Park, a 127-acre, 16-buidling complex less than 17 miles from downtown Washington, D.C.

The acquisition is Mori Trust’s second purchase in the region. In March, Mori Trust acquired Arboretum II, two office buildings in Herndon, Va., totaling approximately 323,000 square feet of space, for $142 million from Barings. The two properties were fully leased.

The Japanese real estate company entered the U.S. market in January 2017 with the purchase of two Boston office buildings—10 St. James Ave. and 75 Arlington St. in the Back Bay submarket—from Liberty Mutual for approximately $673 million.